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Master The Gap

March 15, 2017

Free video training, I show you the elements of Holistic Trading and how you can make money trading with these concepts.

I show you specific techniques from the Holistic Trading arsenal. Take them and make money with them!

CourtneySmith.com/Second-part-of-your-Training/

Holistic Trading is a way of investing that takes a 360 degree look at the market so you get a very deep understanding of the current market. Very little will surprise you. You will feel a sense of ease as you will know what's going to happen before it happens. You will understand who is controlling the market and how to trade profitably with that information.

I explain it in this free video training which you can see by clicking here.

June 2, 2011

In the timeless words of Sir Winston Churchill, “Those who fail to learn from history are doomed to repeat it."

Though Churchill was not speaking of the markets, the concept is certainly applicable. In fact, the easiest way to make money trading the markets, is to avoid those setups that have been unprofitable historically.

Many folks obsess over trying to trade every winning setup. I do not. I am a gap fader. When the historical probabilities are favorable, I will short ‘up’ gaps and buy ‘down’ gaps. Since more than 70% of all opening gaps have filled the same day historically in the U.S. indices, I do not need to catch every winner to be successful.

In fact, I’ve had my best success focusing on simply trying to avoid the majority of the losing setups. Let’s a take look a look at a real market example.

Had you hypothetically faded every tradable opening gap since 2004 in the SPY (S&P 500 ETF), using a reasonable size stop (e.g. 30% of the 5 day ATR) to accommodate post-open volatility, you would not have made much in profits:

Now let’s look at these results segmented by day of week – one of the easiest filters to incorporate into your trading plan:

September 2, 2010

To trade the opening gap or not is the single most important decision many short-term and swing traders make on a given day. Further, many traders struggle with profiting from the opening gap - arguably the most lucrative of all intraday setups.

Join "The Gap Guy," Scott Andrews, as he shares his probability-based methodology, helpful research and tips for getting started with the easiest trade of the day. Whether you trade stocks or indices, this webinar will help you avoid the riskiest opening gap setups while maximizing the profits of your winning trades. Scott will also show you how he simplifies execution and avoids many of the pitfalls of discretionary, indicator-based trading.

August 24, 2010

Do you have historically tested data showing which day of the week you should avoid?

Historical probabilities could be the secret sauce that has been missing from your trading plan. Check out the free research video below to learn more about which day of the week works best for trading the opening gap in Google.

August 4, 2010

Trading is a lot like flying a helicopter in combat.The stakes are high and the risks are everywhere. The enemy can shoot you down, the aircraft can malfunction, or you can simply crash and burn on your own.

As a “butter-bar” (2nd) Lieutenant fresh out of West Point, I learned how to fly from the best of the best at the U.S. Army Aviation Center in Fort Rucker, Alabama.I’ll never forget the words of my first instructor, a crusty ol’ Vietnam veteran with a big southern drawl, “I’ll teach everything you need to know to fly that helicopter, but whether you survive or not, is totally up to you.”Believe me; he was not talking about whether I’d graduate from the program.Up to that point, it had never crossed my mind that the world’s greatest instruction was no guarantee for my survival.

When I started trading the parallels between learning how to fly and learning how to trade, were striking.The keys to success were threefold:1) master the fundamentals, 2) start slow, and 3) above all else, SURVIVE the learning curve. So, I enrolled in a rigorous, monthly training program with a credible trading and options mentor.

Though I followed his system and rules precisely, I struggled with consistency.Because his approach was completely indicator-based and heavily reliant upon options, it was impossible to back-test and, therefore, I never knew if any given loss was due to my execution (i.e. interpretation of the charts) or was simply an unavoidable loser. (Using the flying analogy, it was sort of like having an accident and not knowing whether the cause was “pilot error” or an engine malfunction.)

Further, having significant sums of capital at risk in volatile stocks for weeks or more at a time was driving me crazy and making me sleep a little lighter than I liked. Just like a newbie pilot-in-training, I kept “over-controlling” by tinkering with my trades (i.e. cutting the winners short) in an attempt to reduce risk and lock in profits.This, of course, resulted in the classic beginning trader’s diet: “eating like a mouse and defecating like an elephant.”

After a year and a half, it was clear: this proven but highly subjective methodology was a terrible fit for “me.” I knew how to “fly”, but I needed to find an “aircraft” better suited for my personality.So, I went looking for a style and approach that would work for my strengths (disciplined and mathematically inclined), my weaknesses (impatient and limited day-trading experience), and desired lifestyle (flexibility during the day without having to watch screens all day – I didn’t want another “job.”)Ultimately, this led me to the world of gap trading, and specifically fading the opening gap of the U.S. equity indices such as the S&P 500, Dow 30, NASDAQ 100, and Russell 2000.

Why I Love Trading Gaps

Trading gaps may not be for everyone.But for me, I consider fading (i.e. trading in the opposite direction) the opening gap, the ideal trade setup.Here’s why:

1)Gaps have an inherent directional bias and edge.Over 70% of all gaps in the U.S. indices have filled the same day over the past ten years.

2)They occur daily. I am not reliant upon catching that "one big winner" to achieve my monthly or yearly goals.

3)They offer plenty of profit opportunity.In fact, the best move of the entire day often occurs right after the opening bell.

4)I can prepare in about 15 minutes before the market opens. No need to scan hundreds of stocks at night.

5)It's an easy trade to learn and play.No need to "time" the entry - just use a market order at the open and trade in the opposite direction of the opening gap.

6)“Fire and forget.”The targets and stops are pre-definedso I don't have to manage the trade after placing it.

7)Minimal slippage.Getting orders filled at my desired price is not an issue due to the highly liquid nature of the equity indices.

8)My risks are controlled and limited.Plus, the trade is often over in an hour or two, so there is no overnight risk.

9)Gap trades work in bull and bear markets equally well.I don't need to predict the market’s next move.

10)Understanding the bias of the market after the open provides a trading edge for the rest of the day.This edge is helpful for optimizing my entries on swing and position trades.

If you are looking to improve as a trader, there are two critical questions that you must answer; “What is my primary trade setup?” and “What is my edge?”For me, the answer to the first question is the opening gap.My edge?Historical probabilities.I’ll discuss this unique and compelling advantage in my next article here at Traders' Library's Blog!

Good trading and good gapping!

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Scott Andrews is a professional gap trader. He is also president of MasterTheGap.com, an education service which provides daily probabilities and tools to help traders play opening gaps. Demand for Mr. Andrews' research led to the establishment of MasterTheGap.com in 2007. Prior to trading, he co-founded a technology company and took the company public as CEO in 1999. He is the author of Understanding Gaps and is a frequent speaker at trading and financial conferences. Mr. Andrews earned his MBA from the University of North Carolina, graduated from the United StatesMilitaryAcademy at West Point, and is a decorated aviator of the first Gulf War.